The Government has created massive uncertainty over a capital gains tax, and it should drop its plan entirely, according to ACT Leader David Seymour.
“New Zealanders have waited 483 days to hear whether they will be hit with a CGT.
“Taxpayers and small businesses need confidence if they are to plan for the future. But Labour and NZ First have wavered, even emailing their supporters to ask what they should do.
“Economists also have concerns about the uncertainty created by the Government’s tax plan. This will have done nothing for New Zealand's economic prospects.
“But this uncertainty pales in comparison to the damage a capital gains tax would do to the economy.
“A CGT will further reduce New Zealand’s already low rates of saving and investment in productive assets.
“Introducing a tax on capital gains at a person’s marginal income tax rate and increasing the threshold at which the 10.5 per cent tax rate applies will create a bias against saving and investment in favour of spending, making us all poorer over time. New Zealand doesn’t need a more progressive and more complicated tax system. According to Treasury, the top five per cent of adults already pay a third of all income tax, while the bottom 20 per cent pay nothing.
“A capital gains tax also represents double taxation. The market value of an asset is reduced because prospective owners know they will pay tax on its future income. Taxing the gain in the value of the asset as well means the owner is double taxed.
“A CGT won’t solve our housing crisis – even the Tax Working Group and Michael Cullen agree.
“There is no strong case for a tax on capital gains, and, given the massive uncertainty the Government has created, it would be wise to drop its plan entirely.”